Spring Budget 2020

Our summary focuses on the tax issues which may affect you, your family and your business. If you have any questions, please contact us for advice.

Rates and allowances

Dividend Allowance

The tax-free dividend allowance is unchanged at £2,000.

Private Residence Relief (PRR)

Draft legislation has been issued to make changes to the PRR regime from 6 April 2020. For properties that have not been occupied throughout the period of ownership, available deductions for capital gains tax purposes will be amended as follows:

• the final period exemption will be reduced from 18 months to nine months (there are no changes to the 36 months that are available to disabled persons or those in a care home)
• lettings relief will be reformed so that it only applies in those circumstances where the owner of the property is in shared occupancy with another tenant.

Interest relief for landlords

Landlords will be able to obtain relief as follows:

Payments on account and 30 day returns

Legislation has been enacted to change reporting obligations for residential property gains chargeable on UK resident individuals, trustees and personal representatives. Also introduced is a requirement to make a payment on account of the associated CGT liability. For disposals made on or after 6 April 2020:

• a tax return is required if there is a disposal of UK land on which a residential property gain accrues
• CGT is required to be computed on the reported gain in the tax return

The return needs to be filed and the CGT paid within 30 days of the completion date of the property disposal.

The new requirements do not apply if a chargeable gain does not arise, for example where the gains are covered by PRR.

Stamp Duty Land Tax (SDLT) Surcharge

A SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland is to go ahead. The 2% surcharge is to take effect from 1 April 2021. Where contracts are exchanged before 11 March 2020 but complete or are substantially performed after 1 April 2021, transitional rules may apply.

Corporation tax

The corporation tax rate will remain at 19%. 

Annual investment allowance (AIA)

Companies will be able to claim £1m as AIA for expenditure incurred from 1 January 2019 to 31 December 2020. No announcement was made on extending the date and if unchanged, it will fall to £200,000.

Structure and Building allowance

The relief was increased to 3% and will be available for expenditure on non-residential buildings, for which construction contracts are entered into after 29 October 2018. The increase will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax with transitional rules applying.

First year allowances for business cars from April 2021

The government has announced an extension to 100% first year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021. CO2 emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the first year allowances for low CO2 emission cars and from 110g/km to 50g/km for the purpose of WDAs for business cars.

Making tax digital

There were no announcements on MTD except that the government will publish an evaluation on the introduction of MTD for Vat.

VAT

VAT thresholds remain unchanged.

Entrepreneurs' Relief

The lifetime limit on gains eligible for Entrepreneurs' Relief has been reduced from £10 million to £1 million for qualifying disposals made on or after 11 March 2020.

Employment Allowance

The Employment Allowance provides businesses and charities with relief from their employer NICs bill. Regulations have been issued to restrict the Employment Allowance, from 6 April 2020, to those employers whose employer NICs bill was below £100,000 in the previous tax year. Employers who are connected to other employers (such as companies within a group) will need to add together all of their employer Class 1 NICs liabilities incurred in the tax year prior to the year of claim to determine eligibility.

The maximum Employment Allowance will be increased from £3,000 to £4,000 with effect from 6 April 2020.

From 6 April 2020 the Employment Allowance will operate as de minimis State aid. This means it will contribute to the total aid a business is entitled to under the relevant de minimis State aid cap.

Statutory Sick Pay

The government will support small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related SSP by refunding eligible SSP costs. The eligibility criteria for the scheme include:

• the refund will be limited to two weeks per employee
• employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
• employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
• employers should maintain records of staff absences, but should not require employees to provide a GP fit note

• the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force

National Living Wage (NLW) and National Minimum Wage (NMW)

Significant increases in minimum wage rates take effect from 1 April 2020. The NLW, which is the rate for workers aged over 25 years, increases by 6.2%. The government states this equates to an annual pay rise of up to £930 for a full time worker. From 1 April 2020, the new hourly rates of NLW and NMW are:

• £8.72 for those over 25 years old
• £8.20 for 21-24 year olds
• £6.45 for 18-20 year olds
• £4.55 for under 18s

• £4.15 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship

Increasing the flat rate tax deduction for home working

From April 2020 the maximum flat rate Income Tax deduction available to employees to cover additional household expenses has been increased from £4 to £6 per week where they work at home under homeworking arrangements.

Time to pay

HMRC has a set up a phone helpline 0800 0159 559 to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (COVID-19).

Compliance

HMRC have been given the budget to increase compliance and investigation team headcounts by 1,300, with an expectation that they will raise an additional £4.5bn in tax by 2025, including measures such as a crackdown on taxi firms and scrap metal dealers operating in the grey economy and CIS scheme irregularities.

Pension changes

From 6 April 2020, the adjusted income limit will rise to £240,000 (increased from £150,000) and the threshold income limit will rise to £200,000 (increased from £110,000).

For higher earners the government also reduced the minimum reduced annual allowance that you can have under the tapering rules from £10,000 to £4,000.

IHT

The Nil-rate band remains at £325,000. The residence nil-rate band for deaths in the following tax years are:

• £100,000 in 2017 to 2018
• £125,000 in 2018 to 2019
• £150,000 in 2019 to 2020
• £175,000 in 2020 to 2021

R&D

Research & Development Expenditure Credit (RDEC) rate increases from 12% to 13% from 1 April 2020. The changes to the PAYE cap on the payable tax credit in the SME R&D schemes has been delayed until April 2021.

ATED

The ATED charges increase automatically each year in line with inflation (based on the previous September's CPI).